JCR-VIS Revises Outlook on Medium to Long Term Ratings of Ittehad Chemicals Ltd

Karachi, March 14, 2006: JCR-VIS Credit Rating Company Limited (JCR-VIS) has maintained the medium to long-term ratings of Ittehad Chemicals Ltd (ICL) at A (Single A) and A- (Single A Minus) for the TFC issue and the entity respectively. The outlook on these ratings has been revised from ‘Stable’ to ‘Negative’. The short-term entity rating has also been revised from A-1 (A One) to A-2 (A Two).While taking this rating action JCR-VIS has taken into account the change in the company’s risk profile arising from an aggressive capital expenditure plan that was primarily debt funded. Although the business plan behind the capital expenditure strategy is well conceived and has already started to yield benefits in terms of profitability, the high level of debt acquired in the process means that cashflow coverages of debt, despite the significant expected increase in cashflows in absolute terms, would not be commensurate to the assigned ratings over the short to medium term unless the capital structure is adequately strengthened. The management is already in the process of issuing preference shares of at least Rs 200m and this would provide some support to the capital structure. JCR-VIS will continue to monitor developments at ICL, particularly with reference to any plans the management may develop over the coming months with regard to further strengthening of the capital structure, and would keep the public informed accordingly.

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relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its
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This rating/ranking is an opinion and is not a recommendation to buy or sell any securities.
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2006
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